Real Estate

200 basis points Stress test

  • Last Updated:
  • Aug 11th, 2019 1:10 pm
[OP]
Newbie
May 2, 2017
90 posts
70 upvotes

200 basis points Stress test

What’s the point of current stress test?
Since overnight interest rate is expected to go down( we are at the end of hiking cycle) , why do borrowers still need to pass stress test with an extra 200 basis points?The gap between neutral rate and current overnight rate is only 75 basis points. If we are at the beginning of hiking cycle or the gap between neutral rate and overnight rate is 200 basis points, then it will be appropriate to have an extra 200 basis points stress test. An extra 200 basis points overkills some proper demand and economic growth today. If we are finding the balance point between healthy economic growth and risk management, then 75 would be more reasonable than 200. It looks like that the goal is driven by socialistic ideology.
2 replies
Deal Addict
Jul 3, 2007
1694 posts
1755 upvotes
Toronto
I think you should call OSFI and complain...
Deal Fanatic
Feb 29, 2008
8718 posts
3797 upvotes
I've been calling for them to reduce it. It really makes no sense. People like me who have capital can pass easily, but not the average Joe. So the test does not benefit average homebuyer, just folk who are rich or have a bunch of money/equity, etc.

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